Big boost in minimum wage: Would Prop. 1 pay off?

A year ago, Jorge Sanchez was struggling to support his family on $9.75 an hour after a decade as a dishwasher at the Hilton hotel.

So Sanchez, 56, threw his support behind hiking the minimum wage to $13 an hour for hotel workers in this port city just south of Los Angeles. A campaign flier featuring Sanchez in his white work uniform urged Latino voters to go to the polls last Nov. 6 and check “Yes” on Measure N.

But the Colombia native soon experienced what he believes was an unintended consequence: The same month he got a $3.25-an-hour bump in pay, Sanchez’s employer cut his workweek from 40 to 30 hours.

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“Measure N was good because it raised our wages. But in reality, what the hotel did was cut our hours, so it hasn’t made a change,” he said.

Unlike Sanchez, Hilton bellman Donald Blackwood still works a 40-hour week and pulls in an extra $800 a month thanks to the city’s “living wage” law.

“Now, I have enough money saved up to buy a car,” he said. “I’m not going to say it’s a lot of money. But you could live on that.”

Next month, people in SeaTac will vote on a similar yet broader ballot initiative:
Proposition 1 would lift the minimum wage to $15 an hour for workers at the airport and its nearby hotels, parking lots and car-rental agencies. That’s a 63 percent increase over Washington’s current minimum wage of $9.19 an hour, the highest of any state.

Both the SeaTac and Long Beach measures are part of a stepped-up effort by labor and community activists nationwide to end what they call poverty-wage jobs.

Workers at fast-food chains conducted walkouts and strikes last summer, hoping to boost their hourly pay to $15. California lawmakers agreed last month to raise the state’s minimum wage from $8 to $10 an hour by 2016. And in Seattle, both mayoral candidates are plugging an hourly minimum standard of $15 or more.

Prop. 1 proponents say it would lift low-wage workers out of poverty and give them more money to spend at local businesses, pumping an additional $54 million into the economy. Opponents say it would drive up labor costs and force employers to lay off workers, reducing jobs by 5 percent.

But if Long Beach is any indication, the short-term effects of a living-wage ordinance in SeaTac would be neither as good as supporters hope, nor as bad as critics warn.

Hotels make changes

Measure N won the backing of 64 percent of Long Beach voters last November, affecting about 2,000 workers at 16 large, nonunionized hotels. Its requirements apply to hotels with 100 or more rooms and can be waived in union contracts.

The Hyatt chain recently began contract negotiations with Unite Here Local 11, making its two Long Beach hotels eligible for exemption. (That means there now are four large, unionized hotels in Long Beach.)

Two other hotels had a different response: They mothballed rooms to bring them just below Measure N’s 100-room threshold.

At Hotel Current, a 143-room independent property off Pacific Coast Highway, 44 rooms sit empty amid tentative plans to convert them to a fitness center. The 173-room Best Western Golden Sails closed even more rooms.

Hotel Current’s downsizing was in the works before Measure N, but the “anti-business regulations” accelerated its decision, management said in a statement, adding that the ordinance “financially cripples the hotel’s operations.”

Management at nearly all of the other affected hotels, including the Hilton, did not respond to requests for comment.

“They don’t want to say they’re having to lay off people, that sort of thing,” said Randy Gordon, president and CEO of the Long Beach Area Chamber of Commerce.

Modest price increases

Gordon, a vocal critic of Measure N, said hotels probably are using cost cuts and price increases to maintain profits. He said he worries that Long Beach no longer will be seen as an affordable business-travel destination.

“How many conventions do we lose because of higher room rates?” he said. “We compete with Anaheim, San Diego and Sacramento. They don’t have a living-wage ordinance like we do.”

But recent data suggest Long Beach hotels are doing about as well as their Los Angeles County rivals, with strong demand and only modest price increases.

Long Beach’s hotel-occupancy rate from January through July was 76.1 percent, up 3.4 percent from the same period in 2012, according to PKF Consulting. Countywide, occupancy ticked up 2.3 percent to 80.5 percent.

The average daily room rate in Long Beach rose 2.9 percent to $137.01 for the first seven months of 2013, while countywide it increased 4.2 percent to $172.33.

The minimum-wage increase also does not appear to have hurt jobs in Long Beach. The city’s unemployment rate declined to 11.2 percent in August from 12.4 percent a year ago — in line with a countywide drop to 10.2 percent from 11.3 percent. (Sector-specific jobs data for Long Beach is not available, according to the California Employment Development Department.)

Nusrat Mirza, general manager of the Renaissance Long Beach, said he has raised prices a little bit because of Measure N but has not laid off workers or cut their hours. He said the biggest change is that he no longer can afford to offer discounts to prospective customers.

“It’s a very expensive measure,” said Mirza, who oversees about 250 employees. “Discounted prices don’t match with the new hourly wage increase.”

“It’s not helping me”

Measure N guarantees Long Beach’s hotel workers a raise of at least 2 percent each July, putting the current minimum at $13.26 an hour.

Both measures also require hotels to provide paid sick leave and give all the proceeds of any mandatory service charges to their employees.

Sanchez said he and his co-workers were replaced in part by less-expensive temporary employees.

Workers at some hotels say that to hold down wage and benefits costs in the wake of Measure N, managers also are covering more shifts and requiring that only sold rooms be cleaned.

Sanchez, who shares a tiny, rent-controlled apartment in Long Beach with his wife and 29-year-old daughter, now is considering a second part-time job to get ahead. The apartment’s entry includes a sofa, flat-screen TV, small dining table and single bed. A green chile hangs above the front door to ward off bad luck.

Ironically, the Hilton recognized Sanchez as “Associate of the Month” in January, awarding him a plaque that he displays in his one-bedroom apartment along with a framed portrait of the Rev. Dr. Martin Luther King Jr.

“Measure N has been very beneficial for people working full-time,” he said. “But it’s not helping me because I’m not full-time.”

Effects of cost cutting

Maria Bautista also hoped to fare better under Measure N. Her hourly wage at the Residence Inn Downtown, where she has cleaned rooms for five years, shot up 30 percent in January. That, she said, enabled her to treat herself to new sandals at Ross and eat out more often at her favorite Chinese restaurant.

But a month ago, a new manager came in and cut her workweek to 32 hours from 40, blaming the offseason, she said.

Bautista, who describes her age as 58 or 59, shares an apartment in Santa Ana with her sister and 30-year-old nephew. They get by, but money is tight, and Bautista feels more pressure at work to make up for lost time.

“Sometimes, rooms don’t get done,” she said. “There’s not enough time to do everything.”

Bruce Baltin, senior vice president of PKF Consulting in Los Angeles, said cost cuts also could mean renovation delays and canceled projects — things that might not be apparent right away. PKF estimates that hotels spent about 45 percent of their operating budgets on labor last year.

“People are our biggest asset, and sometimes we forget that,” said John Self, a professor at the Collins College of Hospitality Management at California State Polytechnic University. “But sometimes unions forget that we have to be profitable. It’s almost a lose-lose situation.”

He suggested the hospitality industry could have prevented Measure N by paying its workers more to begin with — say, a minimum of $11 an hour.

“Sometimes, by being so cautious,” he said, “you shoot yourself in the foot and create an opening for the unions to come in.”

Life is better for some

Blackwood, the Hilton bellman, recalls trying to live for years on $8 an hour. He and his mother share a small Long Beach apartment, making do with her Social Security checks and his minimum-wage job.

“Before Measure N, I couldn’t afford a car. I had to ride the bus. And sometimes, I didn’t have enough money for the bus,” said Blackwood, 43. “If I didn’t make enough tips, I’d have to buy a bag of potatoes and eat that with butter.”

After their Long Beach victory, advocates for low-wage workers are turning their attention to other hotel markets. In Los Angeles, Unite Here aims to establish a $15-an-hour minimum wage for hospitality workers citywide, expanding a 2007 ordinance covering airport hotels.

Labor activists also have used ballot initiatives to establish living wages at the Oakland airport and nearby Emeryville hotels. Similar requirements at the Los Angeles, San Francisco and San Jose airports were enacted by local city councils.